Emeryville, California – XOMA Corporation, a biotechnology royalty aggregator, is carving out a niche in the pharmaceutical industry by acquiring economic rights to royalties from partnered approved or clinical-stage drugs. With a diverse portfolio focused on various development phases, including partnerships with major players like Roche, AcelRx Pharmaceuticals, and Organon, XOMA is positioning itself as a key player in the industry. The recent acquisition of Kinnate Biopharma further expands its reach into oncology, adding to its already impressive IP portfolio. However, while XOMA’s business model appears sustainable, some investors are cautious about its stock’s potential compared to other biotechs.
Founded in 1981, XOMA’s approach to biotech IP management sets it apart from traditional biotech companies focused on in-house research and development. By acting as an “investment manager” of biotech IP, XOMA spreads its investment across diverse therapeutic areas like oncology, immunology, and rare diseases. This diversified approach aims to mitigate risks associated with the pharmaceutical industry’s high level of uncertainty surrounding drug development.
XOMA’s portfolio boasts over 70 assets, including commercial and investigational drugs from various biotechnology firms. With key partnerships in place and royalties from successful drugs like Roche’s Faricimab, XOMA is poised for growth in the coming years. The recent acquisition of Kinnate Biopharma further solidifies its position in the oncology space, showcasing its commitment to expanding its portfolio and providing a diversified income stream.
Despite its promising portfolio, XOMA’s equity valuation raises some concerns among investors. With a market cap of $266.5 million and a high forward P/S multiple of 9.9, XOMA’s stock appears somewhat pricy compared to its peers. The company’s ongoing cash burn and the nature of its revenue streams suggest that while its business is stable, the stock may not offer the explosive upside potential seen in other biotechs.
In light of these factors, investors may find XOMA’s preferred shares a more attractive option. With a dividend yield of approximately 8.5%, the preferred shares offer a steady income stream for income investors. While regulatory risks and concentration of revenue streams pose some threats, XOMA’s preferred shares could be a valuable addition to a diversified dividend portfolio, providing investors with a more stable investment option compared to the company’s equity.
In conclusion, XOMA’s unique approach to biotech IP management presents both opportunities and challenges for investors. While its business model offers steady revenue streams with some speculative potential, its valuation and ongoing cash burn raise concerns about its stock’s attractiveness. For those seeking consistent dividend income, XOMA’s preferred shares may offer a more appealing investment option, adding a layer of stability to a diversified portfolio.
